GameStop 2013 Annual Report Download - page 36

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Technological advances in the delivery and types of video games and PC entertainment software, as well as changes in
consumer behavior related to these new technologies, could lower our sales.
While it is currently possible to download video game content to the current generation video game systems, downloading
is somewhat constrained by bandwidth capacity. However, broadband speeds are increasing and downloading technology is
becoming more prevalent and continues to evolve rapidly. The new consoles from Sony and Microsoft have improved download
technology. If these consoles and other advances in technology continue to expand our customers’ ability to access and download
the current format of video games and incremental content for their games through these and other sources, our customers may
no longer choose to purchase video games in our stores or reduce their purchases in favor of other forms of game delivery. As a
result, our sales and earnings could decline.
We may not compete effectively as browser, mobile and social gaming becomes more popular.
Gaming continues to evolve rapidly. The popularity of browser, mobile and social gaming has increased greatly and this
popularity is expected to continue to grow. Browser, mobile and social gaming is accessed through hardware other than the consoles
and traditional hand-held video game devices we currently sell. If we are unable to respond to this growth in popularity of browser,
mobile and social games and transition our business to take advantage of these new forms of gaming, our financial position and
results of operations could suffer. We have been and are currently pursuing various strategies to integrate these new forms of
gaming into our business model, but we can provide no assurances that these strategies will be successful or profitable.
Our ability to obtain favorable terms from our suppliers may impact our financial results.
Our financial results depend significantly upon the business terms we can obtain from our suppliers, including competitive
prices, unsold product return policies, advertising and market development allowances, freight charges and payment terms. We
purchase substantially all of our products directly from manufacturers, software publishers and, in some cases, distributors. Our
largest vendors worldwide are Sony, Microsoft, Nintendo, Take-Two Interactive, Electronic Arts and Activision, which accounted
for 20%, 15%, 12%, 11%, 10% and 10%, respectively, of our new product purchases in fiscal 2013. If our suppliers do not provide
us with favorable business terms, we may not be able to offer products to our customers at competitive prices.
If our vendors fail to provide marketing and merchandising support at historical levels, our sales and earnings could be
negatively impacted.
The manufacturers of video game hardware and software have typically provided retailers with significant marketing and
merchandising support for their products. Additionally, AT&T and Apple provide our Technology Brands stores with similar
support. As part of this support, we receive cooperative advertising and market development payments from these vendors. These
cooperative advertising and market development payments enable us to actively promote and merchandise the products we sell
and drive sales at our stores and on our Web sites. We cannot assure you that vendors will continue to provide this support at
historical levels. If they fail to do so, our sales and earnings could be negatively impacted.
We have made and may make investments and acquisitions which could negatively impact our business if we fail to
successfully complete and integrate them, or if they fail to perform in accordance with our expectations.
To enhance our efforts to grow and compete, we have made and continue to make investments and acquisitions. These
activities include investments in and acquisitions of digital, browser, social and mobile gaming and technology-based companies
as the delivery methods for video games continue to evolve, and investments in new retail categories like wireless and consumer
electronics. Our plans to pursue future transactions are subject to our ability to identify potential candidates and negotiate favorable
terms for these transactions. Accordingly, we cannot assure you that future investments or acquisitions will be completed. In
addition, to facilitate future transactions, we may take actions that could dilute the equity interests of our stockholders, increase
our debt or cause us to assume contingent liabilities, all of which may have a detrimental effect on the price of our common stock.
Also, companies that we have acquired, and that we may acquire in the future, could have products that are in development, and
there is no assurance that these products will be successfully developed. Finally, if any acquisitions are not successfully integrated
with our business, or fail to perform in accordance with our expectations, our ongoing operations could be adversely affected.
Integration of digital, browser, social and mobile gaming and mobile phone and technology-based companies or other retailers
may be particularly challenging to us as these companies are outside of our historical operating expertise.
Pressure from our competitors may force us to reduce our prices or increase spending, which could decrease our
profitability.
The electronic game industry is intensely competitive and subject to rapid changes in consumer preferences and frequent
new product introductions. We compete with mass merchants and regional chains, including Wal-Mart and Target; computer
product and consumer electronics stores, including Best Buy; internet-based retailers such as Amazon.com; other U.S. and